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Implementing Lean Manufacturing by Third Party Logistics Outsourcing

Lean Manufacturing

Lean manufacturing is likely one of the business philosophies these days that have been embraced by most corporations across the world. While it was initially intended for the improvement of producing systems and processes, it made its mark throughout the rest of the enterprise as well.

Lean manufacturing originated further from business policies of 1 of Japan’s top automobile maker Toyota. This is very obvious since a number of the vocabulary used in the lean manufacturing processes or systems are Japanese words like kaizen, kanban and andon.

Lean manufacturing has since been area of the business system and is frequently observed by most companies across the world.

Lately, lean manufacturing continues to be implemented by companies by hiring 3rd party logistics. Lean manufacturing by alternative logistics is feasible by outsourcing.

Lean Manufacturing By Third Party Logistics

Outsourcing is currently the trend in most businesses today. In fact, General Motors of North America has been using outsourcing as part of its competitive advantage strategies. This company has plenty of experience when it comes to the study of an outsourcing company’s capabilities and solutions.

Lean manufacturing by 3rd party logistics has been utilized by the majority of the companies today including General Motors. General Motors identified the Powertrain Warren plant where General Motors can implement lean manufacturing they usually used alternative logistics to do this.

It embraced lean manufacturing principles by third party logistics and utilized the plant to effectively manufacture engines. Additionally it used lean manufacturing by third party logistics to resolve transportation issues.

Later general Motors made a decision to further use lean manufacturing by 3rd party logistics for the whole group. Greater benefits are evident a little distance from economies of scale. Clearly, the teachings of lean manufacturing are to add value and resolve waste simplifying the manufacturing process.

Steps Done In Choosing Lean Manufacturing By Third Party Logistics

General Motors made its choice on what potential supplier or alternative logistics to select from a number of factors enumerated below:

1. The quality whatever the lean manufacturing by third party logistics.

2. The renderer whatever the lean manufacturing by third party logistics.

3. The available technology or innovation whatever the lean manufacturing by third party logistics.

4. The price no matter what the lean manufacturing by alternative logistics.

The Benefits From Lean Manufacturing By Third Party Logistics

In line with the principles of lean manufacturing, the outsourcing party must be capable of it all whatsoever costly and essentially the most relaxed manner.

Understand it of General Motors to outsource its transportation function has been as a great tool and is very working well. The alternative logistics to get a ninety nine percent record for on-time performance and actually has met its objective to realize significant savings for General Motors.

The lean manufacturing by alternative logistics has actually been implemented rather well in the case of General Motors. The available visibility of the gadgets and data information using the supply chain pipeline of General Motors has been a value or a unexpected.

Furthermore, the lean manufacturing by alternative logistics strategy covered scanning of all of the General Motor’s freight and updated the advance shipping notifications of General Motors.

To make sure that both parties will combine their efforts to continuously improve processes according to principles of lean manufacturing, the outsourcing arrangement will incorporate a gain sharing component.

Lessons Available From The Outsourcing Journal

The lean manufacturing by alternative logistics strategy is worthwhile since outsourcing a few of the company’s functions for example the transportation functions will allow a buyer to possibly leverage the strength of the supplier in the economies of scale if you would like to achieve numerous objectives that provide on-time performance and cost reduction.

From the view whatever the third-party logistics supplier, it’ll manage the transportation function. It may also choose using subcontract arrangements for some portions of the path, or otherwise perform and deliver the transportation services along with management decisive component.

Lean manufacturing by third party logistics have a gain sharing mechanism indicated within the outsourcing contract which is a impressive solution for an incentive and also for continuous reduction of cost and the advance of services.

Questions and Answers

What is the difference between logistics and supply chain management?

Posted by anurag

The following comes from the Council of Logistics Management Definitions (Cut and pasted from their website):

The Definition of Logistics
Logistics management is that part of the Supply Chain Management process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers' requirements.

These are the boundaries and relationships of Logistics Management adopted by the Council of Logistics Management: "Logistics Management activities typically include inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management of third party logistics services providers. To varying degrees, the logistics function also includes sourcing and procurement, production planning and scheduling, packaging and assembly, and customer service. It is involved in all levels of planning and execution — strategic, operational and tactical. Logistics Management is an integrating function, which coordinates and optimizes all logistics activities, as well as integrates logistics activities with other functions including marketing, sales manufacturing, finance and information technology."

The Definition of Supply Chain Management
Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.

These are the boundaries and relationships of Supply Chain Management adopted by the Council of Logistics Management: "Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the Logistics Management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology."

Put another way:

Logistics is typically considered a sub-set of SCM. In SCM, there are five key functions: Procure, Make, Move, Store, and Service. Most view Logistics as the movement of products from point A to point B and all the activities involved to make this happen (from carrier selection to planning to execution). Logistics is involved at various stages of a supply chain; from supplier to plants, from plants to distribution centers, from distributions centers to stores, from stores to customers, or any of these combinations.

Any Expert in tax to advise, where to choose as logistic centre in euro countries?

HIHI, i am not familiar with euro tax and import issues….we are thinking to set up a logistic centre in german, among the following countries: lithuanina, italy,german, poland, crech, sweden, hungary…..Knowing that our product is not subject to import tax in germany ……so is it the only factor we should consider ??? Any other factors may affect the decision????

Posted by Dora

There are a number of issues you should consider when setting up a logistic centre in the EU.

First of all you are talking about two different kinds of government fees. If your products are coming from outside of the EU they are subject to import customs duties. This is a charge that the customs authorities levy on certain products in order to make competition between foreign companies and local companies more fair. That's why they charge German companies importing ball bearings from China 8% of the price of the goods, for example. Not all goods are subject to import customs duties, though.

On the other hand, you must pay import tax in Germany. There is no possible way you can get out of it, unless you are importing from another EU country, in which case you will have to pay their import tax. The import tax on all goods entering Germany is 19%, which is the same as the VAT (value added taxes).

The following countries have the following Value Added (VAT) Taxes – Import Taxes:

Of course there are other factors to consider:
Labour costs for logistic centre: What will you have to pay in worker wages?
Costs for renting or leasing buildings and transport vehicles
If you use a third-party transport service, what will the costs be? How reliable is the shipping company? How fast can they transport goods?

In this case, Germany and/or the Czech Republic are good choices, because:
– They are located in the middle of Europe
– They have well-trained reliable workers
– The wages are more affordable than in countries like Sweden
– You will not have to invest in buildings and vehicles as much as you would in Lituanina or Hungary.

The Netherlands is also a good tip, because its harbour fees for sea goods are lower than Hamburg, but their rental/leasing rates are higher, because land is scarce in the Netherlands.

If you want to invest a lot in a distribution centre, then you really should look for a local consultant.

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